CPD Presentation On Analysis of The National Budget For FY2018 19

বাাংলাদেদের উন্নয়দের স্বাধীে পর্যাদলাচো
An Analysis of the
National Budget for FY2018-19
Dhaka: 8 June 2018
www.cpd.org.bd
CPD IRBD 2018 Team
Dr Debapriya Bhattacharya and Professor Mustafizur Rahman, Distinguished Fellows, CPD were in overall
charge of preparing this report as Team Leaders.
Lead contributions were provided by Dr Fahmida Khatun, Executive Director; Dr Khondaker Golam
Moazzem, Research Director; and Mr Towfiqul Islam Khan, Research Fellow, CPD.
Valuable research support was received from Mr Md. Zafar Sadique, Senior Research Associate; Ms Umme
Shefa Rezbana, Senior Research Associate; Mr Mostafa Amir Sabbih, Senior Research Associate; Mr Md.
Arfanuzzaman, Programme Manager (Project); Mr Muntaseer Kamal, Research Associate; Ms Sherajum
Monira Farin, Research Associate; Ms Sarah Sabin Khan, Research Associate; Mr Md. Al-Hasan, Research
Associate; Mr Md Kamruzzaman, Research Associate; Mr Syed Yusuf Saadat, Research Associate; Mr Kazi
Golam Tashfique, Research Associate; Mr Suman Biswas, Research Associate; Ms Lumbini Barua, Research
Associate; Mr Sk. Faijan Bin Halim, Research Associate (Project); Mr Syed Muhtasim, Programme Associate;
Ms Anika Muzib Suchi, Programme Associate; Ms Tanishaa Arman Akangkha, Programme Associate, Mr
Mahir A. Rahman, Programme Associate; Ms Tanzila Sultana, Programme Associate; Mr Md. Minhaz
Mohaimim Reza, Programme Associate (Project); Mr Md Irtaza Mahbub, Programme Associate
(Communication); Ms Jarin Tasnim Nashin, Intern; Ms Shamila Sarwar, Intern; Ms Barisha Towhid, Intern;
and Mr Tahsin Ahmed, Intern, CPD.
Inputs were also received from Mr M Shafiqul Islam, Director, Administration & Finance; Mr Uttam Kumar
Paul, Deputy Director, Accounts; Mr Md. Shamimur Rohman, Senior Accounts Associate; Mr Muhammad
Zillur Rahman, Accounts Associate; and Mr Md Aurangojeb, Program Associate (Accounts), CPD.
Mr Towfiqul Islam Khan was the Coordinator of the CPD IRBD 2018 Team.
CPD (2018): An Analysis of the National Budget for FY2018-19 2

Acknowledgements
The CPD IRBD 2018 Team would like to register its sincere gratitude to Professor
Rehman Sobhan, Chairman, CPD for his continuing advice and guidance.
The Team gratefully acknowledges the valuable support provided by Ms Anisatul Fatema Yousuf,
Director; Dr Anis Pervez, Additional Director; Mr Avra Bhattacharjee, Deputy Director; Mr Md.
Sarwar Jahan, Dialogue Associate (Web); Mr Sazzad Mahmud Shuvo, Dialogue Associate
(Communication); Ms Asmaul Husna, Publication Associate; Ms Maeesa Ayesha, Programme
Associate; Ms Aroni Mahmud, Event Executive; Mr Md. Shaiful Hassan, Programme Associate (DTP),
Dialogue and Communication Division, CPD in preparing this report.
Contribution of the CPD Administration and Finance Division is also highly appreciated. Assistance of
Mr A H M Ashrafuzzaman, Deputy Director (IT) and Mr Hamidul Hoque Mondal, Senior
Administrative Associate is particularly appreciated.
Concerned officials belonging to a number of institutions have extended valuable support to the CPD
IRBD 2018 Team members for which the Team would like to register its sincere thanks.
The CPD IRBD 2018 Team alone remains responsible for the analyses, interpretations and conclusions
of this presentation.

Contents
I. INTRODUCTION
II. MACROECONOMIC FRAMEWORK
III. FISCAL FRAMEWORK
IV. ANNUAL DEVELOPMENT PROGRAMME
V. FISCAL MEASURES
VI. SELECTED SECTORAL ISSUES
VII. POLICY AND INSTITUTIONAL ISSUES
VIII. CONCLUDING REMARKS

I. INTRODUCTION

I. INTRODUCTION
 The budget for FY19 is being brought out in the context of –

 An election year – an opportunity for the incumbent government
 The penultimate year of Seventh Five Year Plan (FY16-FY20)
 1000 days of SDGs implementation (FY19)
 Double transition – recent entry to the LMIC group (2015), forthcoming
graduation from the LDC group (2024)
 One million Rohingya influx
 The global economy picking up, commodity prices going up as well
 Inflationary pressure in China and India, looming trade war in the West,
paralysis of multilateral system
 Our budget assessment approach
Two core objectives based on review of the state of the economy –
1. Counteracting the emerging stresses on macroeconomic stability
2. Making economic growth and other achievements more inclusive

I. INTRODUCTION
 The budget is being brought out in the backdrop of

Short term strengths Medium to long term strengths
 Stability in growth  Upturn of manufacturing share
 Increased public investment  Increased investment in
 Increased export and remittance growth infrastructure
 Inflation within target  Improvement in human assets
 Expansion of social protection  Improved food security
 Increased flow of foreign assistance
Short term stresses Medium to long term stresses
 Weak revenue mobilisation  Stagnant private investments
 Weak ADP implementation  Inadequate employment growth
 Weak price incentives for farmers and informalisation of employment
 Imbalance in the external sector – increasing current  Skills and productivity deficits
account deficits, pressure on exchange rate and falling  Entrenched regional imbalances
terms of trade including unplanned urbanisation
 Pressure on food inflation building up  Slowing down of poverty alleviation
 Banking sector in doldrums rates
 Increasing consumption, income
 Volatile capital market
and assets inequality
I. INTRODUCTION

II. MACROECONOMIC
FRAMEWORK

GDP, investment and inflation

 For FY19, GDP growth target has been set at 7.80% (7.65% in provisional
estimates for FY18, 7.28% in FY17)
 Moderate improvement in GDP growth and marginal increase (0.2 percentage
point) in public investment have been considered. Private investment
has been estimated to be 25.1% of GDP: a 1.9 percentage point increase from
FY18
 In FY19, (approx.) Tk. 117,000 crore will be additionally required for private
investment (22.7% increase in nominal terms)
 In FY19, (approx.) Tk. 30,000 crore will be additionally required for public
investment (16.1% increase in nominal terms)
 ICOR is expected to be 4.3 inFY19 – productivity of capital to decline (4.1 in
FY18)
 Inflation is assumed to be stable at 5.6%
 Upward trends observed in general, food and non-food inflation in the closing
months of FY18 [ general, food and non-food inflation was 5.83%, 7.32% and 3.58%
respectively on April 2018 (on an annual average basis)]
 Global inflation is predicted to increase (as stated in the MTMPS) in the backdrop
of rising prices of key commodities including oil, food, etc.
Poverty and inequality

 Poverty and employment estimates pose questions regarding the quality
of attained growth in recent years (2010-16)
 Quite perplexing that pace of poverty reduction and employment growth
slowed down when the economy was growing at an average annual rate of
6.5% during the aforesaid period
 The East-West (East: Chittagong, Dhaka, Sylhet; West: Barisal, Khulna,
Rajshahi) divide in Bangladesh poverty scenario appears to have
resurfaced between 2010 and 2016, contrasting the 2005-10 dynamics
 During the 2010-16 period, income inequality in Bangladesh was on the
rise at national, rural and urban levels (Income Gini Co-efficient at the
national level: 0.458 in 2010 vs. 0.483 in 2016)
 Over the same time frame, consumption inequality was fairly constant
(Consumption Gini: 0.321 in 2010 vs. 0.324 in 2016 at the national level)
 Wealth inequality, at the national level, exhibited an increasing trend
between 2005 and 2010 (Wealth Gini: 0.72 in 2005 vs. 0.74 in 2010)

 If monthly household income distribution is investigated at the decile level,

it appears that the bottom 5% and 10% households, at national, rural and
urban levels, have suffered significant decline between 2010 and 2016
 59.1% and 29.9% decline (in nominal terms) for households in bottom 5% and
10% respectively at the national level
 In contrast, the top 5% and 10% households enjoyed a considerable rise
 57.4% and 47.9% increase (in nominal terms) for households in top 5% and
10% respectively at the national level
 The situation was more equitable between 2005 and 2010
 Rich are getting richer, while the poor are getting poorer!

Erosion of real income of labour

 Between 2013 and 2015-16, over three years, average real monthly income
per worker had declined by (-) 3.9%
 Compared to 2015-16, average real monthly income had suffered an
erosion of (-) 2.5% in 2016-17
 The decline was higher for female [(-) 3.8%] compared to male [(-) 1.9 %]
 It can be seen that pace of deceleration has accelerated in 2016-17
 This is observed at a time when wages of formal labour force had been
adjusted, particularly for those working in the public sector
 No surprise, despite registering accelerated economic growth and
generating employment, the pace of poverty reduction had slowed down
 This indicates that, in recent years the larger share of economic growth
may have been disproportionately distributed in favour of capital and
asset owners, compared to the labour

Domestic savings
 Except for two atypical years (FY16 and FY17) Gross Domestic Saving has
been around 22%-23% of GDP since FY13
 Global literature suggests that one of the common reasons for declining
domestic savings is the falling real income and decreasing income growth -
is this the case for Bangladesh?
 For Bangladesh, declining Gross Domestic Saving (as % of GDP) might be
attributable to the rising dissaving at the lower decile households
Table: Gap between income and consumption (Tk. per month per HH)
2010 2016
Household decile
National Rural Urban National Rural Urban
lowest 10% -1940 -1963 -1932 -4095 -4132 -4050
lowest 20% -1805 -1850 -2028 -3105 -3316 -2460
lowest 30% -1719 -1717 -1955 -2502 -2733 -1558
lowest 40% -1555 -1574 -1553 -2059 -2348 -1436
lowest 50% -1331 -1373 -863 -1647 -1978 -1221
Source: Authors’ estimation from HIES 2010 and 2016 data.
Public debt
 Public debt as share of GDP is at a reasonable state for Bangladesh (30.8% in
FY17, 29.8% in the revised target for FY18)
 May increase to some extent in FY19 – driven by increases in both domestic and
external debt
 Currently about 60% of the public debt is attributable to domestic debt
 This composition is expected to rise for our public domestic sources (62.3% in
FY21)
 Government needs to use low-cost borrowings –which has not been the case in
recent years
 Interest payments for domestic debt has already risen significantly
 As we will see later, 19.3% of total operating expenditure goes for debt service
liability in FY19 of which 94.8% is for domestic debt
 In future, debt servicing for large infrastructure projects financing may put
additional pressure in case of foreign sources – debt sustainability may become
an issue

Monetary and external sector

 A stable outlook is perceived for the monetary and external sector during
FY19 to FY21
 Growth of credit to private sector is moderate (16.5%) for FY19, which is
expected to reach 16.9% in FY21
 Growth target for export has been set at 10.0% in FY19
 Up to May FY18, total export growth was 6.7% - mainly driven by RMG export
(9.8% growth), but non-RMG export remains a concern [(-) 6.6% growth]
 Growth target for import has been set at 12.0% in FY19
 Up to March FY18, total import growth was 24.5% which MTMPS expects to
come down to 20% by the end of the year. The target for FY19 appears to be
on the lower side given the high import demand of ongoing and upcoming
large infrastructure projects

Monetary and external sector

 Remittance growth target for FY19 has been set at 15.0%. On the basis of
“quite significant growth in overseas employment (not true – only 1.1% up
to April FY18)”
 Up to May FY18, remittance inflow grew at 17.7% – but this was on top of the
dismal performance in FY17 (and also FY16)
 Exchange rate is expected to be stable – reaching Tk. 82/USD on an
average in FY19, but pressure on Taka may increase if current account
falters further
 It appears that weakness in external sector is either not recognised or
projected to recover
 Currently Tk. 83.7/USD - predicted BDT to appreciate against USD

III. FISCAL
FRAMEWORK

Supplementary budget
 A total of Tk. 400,266 crore was allocated to 62 ministries/divisions
 In revised budget, allocation increased by Tk. 15,339.83 crore for 24
ministries/divisions where combined allocation (additional) share of Prime
Minister’s Office and Power division is 47.41%
 Allocation decreased by Tk. 46,055.66 crore for 35 ministries/divisions
 Overall budget allocation decreased by Tk. 28,771 crore (7.2%) and stood at Tk.
371,495 crore
Top 5 Ministry/Division Share (%) Allocation share of Purpose of supplementary budget
by increase in % allocated required development sector
Power Division 25.59% 99.7% Allocation for 26 ongoing and 18 new
projects
Prime Minister’s Office 21.82% 96.9% Allocation for 5 ongoing project
Local Government 12.18% 70.8% Allocation for 84 ongoing and 44 new

Division projects
Roads and Highways 7.71% 42% Allocation for 25 ongoing and 55 new
project
Economic Relations 7.58% .003% Foreign debt and interest payment
Division

Medium Term Outlook

 Compared to RBFY18, both revenue and total expenditure (as share of GDP) is
expected to grow by about 1.8 percentage points in FY19
 No reflection on implication of revenue mobilisation related reforms (e.g. VAT and
SD Act 2012 to be implemented in FY20 according to the revised timeline)!
 Foreign assistance to finance budget deficit in FY19 is expected to be 2.1% of GDP –
same as RBFY18
 To decline gradually till FY21 with higher dependence on domestic sources
Fiscal framework as share of GDP (%)
FY18 FY18 FY19 FY20 FY21
Indicators FY15 FY16 FY17
(B) (RB) (T) (T) (T)
a. Revenue 9.5 10.0 10.3 13.0 11.6 13.4 13.8 14.2
a.1 Tax revenue 8.5 8.7 9.1 11.6 10.4 12.2 12.5 12.9
a.1.1 NBR tax 8.2 8.4 8.8 11.2 10.1 11.7 11.9 12.3
a.1.2 Non NBR tax 0.3 0.3 0.3 0.4 0.3 0.5 0.6 0.6
a.2 Non-tax revenue 1.0 1.2 1.2 1.4 1.2 1.3 1.3 1.3
b. Expenditure 13.0 13.5 13.7 18.0 16.6 18.3 18.8 19.2
b.1 ADP 4.0 4.3 4.2 6.9 6.6 6.8 7.0 7.2
c. Budget deficit -3.5 -3.5 -3.4 -5.0 -5.0 -4.9 -5.0 -5.0
c.1 Domestic financing 2.8 3.0 2.8 2.7 2.9 2.8 3.2 3.4
c.1.1 Banking 0.3 0.6 -0.4 1.3 0.9 1.7 2.4 2.6
c.2 Foreign financing 0.6 0.5 0.4 2.3 2.1 2.1 1.8 1.6
Broad fiscal framework

 Revenue (30.8% against trend growth rate of 16%) projected to grow faster
(to collect additional Tk. 79,826 crore) than public expenditure (25.1%
against trend growth rate of 14.7%)
 Total budget expenditure is set at 18.3% of GDP (16.6% in RBFY18)
 Revenue income will be 13.4% of GDP (11.6% in RBFY18)
 Development expenditure (16.9%) programmed to grow slower than
operating expenditure (29.8%): 77% of total incremental budget
allocation for operating expenditure (earlier known as non-development
expenditure)!
 ADP: 37.2% of total public expenditure (39.9% in the RBFY18)
 Budget deficit has been projected at 4.9%of GDP (5.0% in RBFY18, actual in
FY17 was about 3.1% of GDP)
 Balance in financing the budget deficit is likely to be restored through limited
foreign financing and increased bank borrowing
 NSD sales is programmed to be reduced – contradicting ongoing trend

Revenue mobilisation Share of revenue FY19

 Budget FY19 targets an additional Tk.
79,826 cr. revenue with a 30.8% growth over
RBFY18
 CPD projection: more than 40%
 NBR to take the lead role (accounting for
89.2% of incremental revenue) with 31.6%
growth
 Non-NBR revenue (non-tax plus non-NBR Incremental share of revenue FY19
tax) growth for FY19 is relatively lower
(25.0%)
 Import duty collection growth target is
22.7%

 More reliance on VAT (to grow by 33.7%) compared to income tax (29.6%)
 More reliance on individual income tax (to grow by 58.4%) compared to
corporate tax (15.9%)
 LTU to collect Tk. 2,370 crore less compared to RBFY18
 More reliance on VAT at domestic level – opposite for SD
 VAT on import to grow by 31.2%, while on domestic by 35.1%
 SD on import to grow by 51.4%, while on domestic by 37.1%
 Overall revenue growth will still need to be triple than the trend growth
rate (FY10-FY17)

Total Public Expenditure

Share in Share in Change in FY19B over Incremental
BFY19 RBFY18 FY18R Share
Sector % Crore Tk % %
Public Services 18.0 11.2 41777 100.1 44.9
Education and Technology 14.6 16.1 8007 13.4 8.6
Transport and
Communication 12.2 12.6 9510 20.3 10.2
Interest Payments 11.1 10.2 13420 35.4 14.4
LGRD 7.0 8.1 2689 9.0 2.9
Defence Services 6.3 7.1 2669 10.1 2.9
Social Security and Welfare 5.8 5.9 5260 24.0 5.7
Public Order and Safety 5.7 6.5 2613 10.9 2.8
Agriculture 5.7 5.7 5226 24.8 5.6
Energy and Power 5.4 6.5 660 2.7 0.7
Health 5.0 5.4 3369 16.8 3.6
Housing 1.1 1.0 1180 31.2 1.3
Recreation, Culture and
Religious Affairs 0.9 0.9 928 27.2 1.0
Industrial and Economic
Services 0.7 0.8 510 17.3 0.5
Others (Memorandum Item) 0.5 1.9 -4740 -65.6 -5.1
Total Expenditure 100.0 100.0 93078 25.1 100.0
 Public services and interest payments account for about 59% of total incremental expenditure
 Public Services Sector receives incremental Tk. 41,777 crore of which Tk. 41,172 crore is
for Finance Division
 Subsidy and Incentives increases incrementally to Tk. 11,001 crore (Total allocation - Tk.
19,601 crore)
 Pension and Gratuities increases incrementally to Tk. 12,431 crore (Total allocation - Tk.
22,439 crore) – kept for retired government employees
 Investments in Equities increases incrementally to Tk. 22,491 crore (Total allocation -
Tk. 24,556 crore)??!!
 Curiously, of the total incremental allocation of Finance Division, about Tk. 39,391 crore
increased for operating expenditure (Tk. 25,501 crore for recurrent and Tk. 13,890 crore
for capital)
 Historically, Finance Division is known for being the custodian of all lump allocations
 Surprisingly, no explanation has been given for keeping such a large amount for
investment in equities!
 Total incremental allocation for Interest Payments – Tk. 13,420 crore
 Of which, domestic - Tk. 12,973 crore
 Incremental allocation for interest on national savings (NSD) - Tk. 13,154 crore
Subsidy and incentives Subsidy: Share of GDP and total budget
10.1
 Total allocation for FY19: Tk. 31,700 12.0
9.9
crore 10.0
6.8
 41.6% increase from RBFY18, 8.0
6.0
4.9
4.7
highest since FY14 6.0
 Agriculture received 28.4% of the 4.0
1.7
1.6
1.2
1.0
0.8
0.8
2.0
total allocation (Tk. 9,000 crore)
 In FY19, no subsidy (loans) was allocated 0.0
FY14 FY15 FY16 FY17 FY18 FY19
to BPDB or BPC whereas Tk. 13,700 (RT) (T)
crore (43.2%) was given to ‘others’ Percentage of GDP Percentage of Budget
 The composition of allocation appears way off the mark given that BPDB and BPC
is expected to make a loss of Tk. 1,247 crore and Tk. 1,111 crore respectively in
FY19 (BPC’s profit making for three years may help)
 Power generation with imported LNG and upward trend in global oil price may create
added demand for subsidy
 Industry sector which includes BTMC, BSFTI, BCIC, BJMC had been in
consecutive loss – a major concern! – Whither privatisation agenda!
Budget Deficit and Financing

BFY19 RBFY18 Growth AFY17
BFY19
Description % of Crore % of
Crore Tk % of GDP Crore Tk over RB
GDP Tk GDP
FY18
Foreign Grants 4,051 0.2 4,457 0.2 (9.1) 701 0.0
Foreign Loan-Net 50,016 2.0 41,567 1.9 20.3 11,603 0.6
Domestic Borrowing 71,226 2.8 66,017 2.9 7.9 55,985 2.9
Bank Borrowing (Net) 42,029 1.7 19,917 0.9 111.0 -8,379 -0.4
Non-Bank Borrowing
29,197 46,100
(Net) 1.2 2.1 (36.7) 64,364 3.3
 Share of domestic financing 56.8% in FY19 (58.9% in RBFY18)

 Tk 42,029 crore (59% of domestic financing) will come from the bank borrowing
(30.2%% in RBFY18) – will drastically reduce NSD sale (Tk. 22,000 crore), but
no measure indicated
 Gross foreign aid requirement will be around USD 7.9 bln (USD 6.8 bln in
RBFY18) – USD 4.0 bln being received during Jul-Mar FY18
 Much will depend on project aid utilisation of ADP – about 93% of total foreign
resources are for ADP projects

IV. ANNUAL
DEVELOPMENT
PROGRAMME

Annual Development Programme

 ADP of Tk. 1,73,000 crore has been proposed for FY19
 6.8% of GDP in FY19 (same in FY18)
 12.8% higher than ADP and 16.6% higher ADP Financing Structure (% of total)
than RADP for FY18
 The rate of implementation of original ADP in
FY17 was 70% (lowest since FY07), average: 81%
in last 10 fiscal years 71.8 64.9 65.3
 Project Aid to finance 34.7% of total ADP in FY19

(35.1% in RADP of FY18)
 Project Aid for FY19 increased marginally by 28.2 35.1 34.7
5.3% from original ADP of FY18

Actual FY17 Revised FY18 ADP FY19
 Rooppur Power Plant accounts for 14.2%
P.A Taka
of project aid allocated for overall ADP for
FY19
 Revenue surplus to finance 24.1% (Tk. 41,773
crore) of total ADP in FY19: 20.4% (Tk. 30,315
crore) in RADP of FY18
Top Five Sectors in ADP FY19

Sector No of Share Share (%) Share (%) Growth (%) ADP
Projects (%) ADP RADP ADP FY18 FY19 over RADP
ADP FY19 FY19 FY18 FY18
Total Five Sectors 786 69.1 71.4 68.3 12.9
Transport 225 26.3 25.3 26.8 21.2
Power 87 13.3 15.1 12.3 2.6
Physical Planning, Water Supply & 231 10.3 10.2 9.7 18.1
Housing
Rural Development & Institutions 125 9.6 11.3 8.6 -0.2
Education & Religious Affairs 118 9.6 9.6 10.9 17.2
Other 12 Sectors 553 28.9 26.2 29.5 28.3
Development Assistance NA 2.0 2.4 2.2 -2.3
Total 1,339 100.0 100.0 100.0 16.6
 The top 5 sectors have received 69.1% of total ADP allocation – concentration ratio to
increase marginally from FY18
 Transport Sector once again has received the highest allocation (26.3% of total) for the
second highest number of projects (225): 21.2% growth over RADP FY18
 For FY19, Physical Planning, Water Supply & Housing has received third highest share in
ADP allocation: 18.1% growth over RADP FY18 – with the highest number of projects (231)
 Apart from Rural Development and Institutions, all other top 5 sectors received higher
allocations compared to RADP FY18 – RDI received substantial rise in RADP allocation
 Tk. 3,467 crore was provided to Development Assistance (2.3% lower than ADP FY18)
 The ADP for FY19 contains 1,347 projects (1,192 for ADP of FY18)
Unapproved Development Assistance Unapproved New
2% 5% Development Assistance 4%
6%
Carryover 2%
Carryover New 8%
8% 6%
Concluding
Concluding Continuing
28%
23% Continuing 53%
55%
FY18 Number of Total Projects: FY19 Number of Total Projects:

1,192 1,347
 Almost similar trend in the structure of ADP continues, apart from more
allocation for concluding projects and less allocation for continuing projects for
FY19 compared to FY18 – positive sign!
 112 new projects are included in FY19 (90 in FY18): 4.1% of total ADP
allocation (5.7% in FY18);
 311 new projects were included in the RADP for FY18
 53% of allocation is provided to 436 projects which will continue to the next
ADP (for FY20)
 However, a total of 538 projects are scheduled to be concluded in FY19, according to

project completion timeline
 267 carryover projects consist of 7.6% of the total allocation
 Physical Planning, Water Supply & Housing sector has 51 of these projects, followed by
Transport (45), Industry (25), Education (24) and Power (23)
 Thus total number of projects which should be concluded: 805
 Planning Commission identified 446 projects which may be completed in FY19
 Many of these are unlikely to be completed by FY19
 78 projects were included in the PPP list in FY19 (36 in FY18) - no visible progress
in earlier ventures!
 Tk.2,000 crore allocated for PPP purpose – kept with finance division
 Too many projects are listed without allocation – this number is increasing consistently
Project
 Share Status
of unapproved FY11 declined
allocations FY12 FY13 FY14
to 5.5% FY15 from
in FY19 FY16 FY17
5.8% FY18 FY19
in FY18
Unapproved projects without 800 702 720 662 624 857 1,172 1,315 1,338
Allocation
Projects listed to seek Foreign Funds 292 259 327 346 338 382 349 360 326
Total Number of Projects in the 916 1,039 1,037 1,046 1,034 999 1,141 1,192 1,347
ADP
PPP 23 16 13 44 40 40 32 36 78
Possible Completion 287 305 330 305 324 324 354 411 446
Status of ‘to be completed’ projects Maximum possible completion of

in important sectors projects in priority sectors by FY2019
Sectors No. of Possible
 Majority of the projects in the priority Projects to completion in
sectors that are scheduled to be be FY19 (%)
completed 50 (50- 90
completed by FY19 but unlikely to be by FY19 90)
completed even if it spends entire
allocation for FY Roads and 88 26.1 43.2 30.7
 About 69% of all to be completed Infrastructure
Roads and Infrastructure projects Power and 46 28.3 50.0 21.7
Energy
(88) will achieve less than 90% progress
 In power and energy sector, only Education and 71 9.9 43.7 46.5
Health
21.7% of its 46 to be completed projects
Local 46 13.0 23.9 63.0
will achieve more than 90% progress Government
 The situation is relatively better for
Local Government projects
 Few mega projects that are scheduled to be completed in FY19 but will not be
completed include Padma multipurpose Bridge project, Providing
Electricity Connection to 15 lakh clients through Rural Electricity extension,
Installation of Single Mooring with Double Pipe Line etc.
Progress of Fast Track Projects

Fast Track Projects Project Name Project Project Projected Possible
Period Cost Progress till Progress till
 Tk. 28,849 crore is allocated (Tk.cr.) Apr, 2018 June, 2019
for FY19 which is 17% of total Padma multipurpose Bridge Jan 2009- 28,793 53.6% 80.2%
project Dec 2018
ADP of FY19 (Tk. 30,929 crore Dhaka Mass Rapid Transit Jul 2012- 21,985 14.9% 42.8%
and 19.8% in FY18) Development Project (Metro Jun 2024
Rail)
 Most of the projects did not Matarbari 2x600 MW Ultra- Jul 2014- 35,984 14.0% 22.2%
make considerable progress Super Critical Coal-Fired Jun 2023
Power Project
except Padma Bridge project 2x660 MW Moitree Super Jul 2009- 16,000 15.9% N/A
 Unable to utilise allocated Thermal Power Plant Jun 2020
budget (unutilised (Rampal)
Construction of Rooppur Jul 2016- 113093 8.1% 19.7%
resources in FY17 was Nuclear Power Plant Dec 2025
Tk.13,689 crore) Padma Bridge Rail Link Jan 2016- 34,989 6.3% 40.6%
Jun 2022
 Given the progress of work of Construction of Single Line Jul 2010- 18,034 16.4% 26.3%
Padma bridge, it would not be Dual Gauge Track from Jun 2022
Dohazari-Ramu-Cox’s Bazar
possible to complete the and Ramu to Ghundum near
remaining works of main Myanmar Border
Developing Port Jul 2015- 3,351 20.9% 31.4%
bridge, river training and rail Infrastructure/Support Jun 2020
links by December 2018 Facilities of Payra Port for
Commencing Port
Operations

 Practice of providing symbolic allocation (the minimum to keep the project

in the ADP list) is still pervasive and increasing
 64 projects under ADP received only Tk. 1 lakh for FY19; 26 projects
received such allocation in FY18: 2.5 time more
 Projects under Tk. 1 lakh have been increasing for subsequent years (18
projects in FY16)
 59 of those projects are investment projects (All of them in FY18)
 57 (89%) of those are carried over from ADP FY18
 19 of the 64 projects are from Physical Planning, Water Supply & Housing
sector (Only 2 in FY18)
 90 ‘investment’ projects under ADP received only Tk. 1 crore or less for
FY18; (48 in FY18)
 FY17 had 31 such ‘investment’ projects
 76 of the projects are carryover (48 of those were carryover in FY18)
 As a whole, these 90 projects received only Tk. 19.1 crore allocation in ADP
FY18 (averaged Tk. 21.18 lakh per project)
 Projects from 15 different sectors shared this allocation

 Ageing projects (Zombies!)

 Out of 1,225 investment projects, 586 (47.8%) are at least 2 years old
 Average age of these 586 projects are 4.6 years
 11 of these 586 projects are 10-16 years old while 4 of them are more than 15 years old
 Establishment of 250 bedded National Institute of Ophthalmology & Hospital (16
years), Upgradation of 50 bed National Institute of Cancer Research and Hospital
into 300 Bed (15 years), Tannery Industrial Estate, Dhaka (15.5 years),
Construction of Third Karnaphuli Bridge (15 years) – revised more than once
 Average implementation rate of these four projects was about 69% up to Feb 2018
 18.7% of such projects have already been revised between 1-4 times
 Number of revisions of projects: 1st (146), 2nd (52), 3rd (16), 4th (1)
 Revised unapproved projects: 71
 326 projects has been listed with an expectation to be financed

with foreign aid
 The estimated cost for all of the projects were considered as USD 124.8 billion
 Estimated project aid to be obtained from different sources are USD 51.3 billion
 Highest share of project aid obtained is in power (37.7% for 46 projects) and
transportation (31.9% for 107 projects) – emphasis on infrastructure to continue!
Cost and time overrun reduces the efficacy of public investment

 Cost escalation and time extension is observed for flagship infrastructure projects
 For example, the timeline of PMB increased by 42.9% due to successive
revisions which led to an increase in cost by 183.3% - further extension of
time and allocation of additional resources is inevitable!
 Similarly, infrastructure development of Payra Port project also faced cost
(210.8%) and time escalation (66.7%)
Cost and Time Overrun of Major Projects
Cost (Crore Tk.) Timeline (Years)
Initial Revised % Planned Revised %
Project Name
Cost Cost increase Years (Expected date increase
of completion)
Padma Multipurpose Bridge 10,162 28,793 183.3 7 10 42.9
Joydevpur-Mymensingh Road Improvement Project (JMRIP) 902 1,815 101.2 3 6 100.0
Developing Port Infrastructure/Support Facilities of Payra Port for 1,128 3,506 210.8 3 5 66.7
Commencing Port Operations
SASEC Road Connectivity: Improvement of Joydebpur-Chandra- 2,788 3,365 20.7 6 7 16.7
Tangail-Elenga Road (N-4) to 4-Lane Highway
Support to Dhaka Elevated Expressway PPP Project 3,217 4,869 51.4 4 10 150.0
Dhaka-Chittagong Railway Development Project 1,151 2,138 85.7 7 12 71.4
Construction of Bibiana-3, 400 MW Combined Cycle Power Plant 3,358 3,358 0.0 3 6 100.0
Shikalbaha Duel Fuel 225 MW Combined Cycle Power Plant 2,008 2,008 0.0 4 6 50.0
School Feeding Programmes in Poor and Distressed Areas (SFP) 1,143 4,992 336.8 4 11 175.0
Physical Infrastructure Development for Selected Private Secondary 2,115 2,253 6.5 3 7 133.3
Schools (PIDSPSS)
 Self-financed development budget is reported for the fifth time (since

FY14)
 Allocation for autonomous bodies and corporations has been increased to 7,869
crore (26.8% decline over FY18) in FY19
 Lowest number of projects (105) since FY14 – good initiative since a large part of
the allocated resources remain unutilised at the end of fiscal year
 Among the 105 projects, ‘Physical Planning, Water Supply & Housing’ has the
highest number of projects (46), followed by ‘Oil, Gas and Natural Resources’
(26), Transport (17) and Power (9)
 Implementation rate is no better than others
 The implementation rate (40.3%) in the first ten months of FY18 was lower
compared to overall ADP implementation (50.2%) in the corresponding period
Self-financed projects of autonomous organisations
FY14 FY15 FY16 FY17 FY18 FY19
Number of projects 130 153 125 155 116 105
Allocation 8,114 5,685 3,997 12,646 10,754 7,869
Utilisation 34.9 45.9 67.0 50.5 40.3 (Jul-
Apr)
Overall ADP implementation 86.4 85.3 86.1 91.1 50.2 (Jul-
Apr)
 The business as usual regarding ADP continues -

 Large number of projects with stagnating implementation capacity
 Rising number of unfunded projects
 Inadequate fund for concluding projects and persistence of carry-over
projects
 Pervasive practice of providing symbolic allocation
 Persistence of ageing projects and ‘zombie’ projects
 Cost and time-overrun for major infrastructure projects continue

V. FISCAL MEASURES

V. FISCAL MEASURES
Personal Income Tax (PIT)

 No change in the tax slabs and tax rates of personal income tax
 Tax-free income threshold for personal income stays same at Tk. 2.5 lakhs –
does not consider the added pressure of the rising food inflation and
decreasing average monthly real wage
 The PIT threshold was last increased in FY16 from the previous ceiling of
Tk. 2.2 lakhs in FY15 (13.6% increase)
 Compensation needed for the 16.9% increase in CPI between July
2015 and March 2018
 The ratio of current threshold amount to per capita income of FY17 is 1.85:1
 CPD has proposed raising the threshold to Tk. 3 lakh and adding a
new (first) slab with 7.5% tax
 Rather, perquisites ceiling has been increased to Tk. 5.5 lakhs from Tk. 4.75
lakh - will benefit the higher income people and not the low-income ones

V. FISCAL MEASURES
 Tax-free income will be Tk. 50,000 (previously Tk. 25,000) higher for parents
or legal guardians of persons with disabilities –promoting social equity
Wealth Surcharge
 Minimum net wealth exemption limit remains at Tk. 2.25 crore
 Wealth surcharge coverage expanded: owners of at least two cars or at least
8,000 sq. ft. of housing property– welcome move to increase revenue and
from equity perspective
 Minimum wealth surcharge applicable for net wealth exceeding Tk. 10
crore has been increased to Tk. 5,000 (previously flat rate Tk. 3000 was
applicable)
Additional tax imposition to promote inclusivity
 Imposition of 5% additional tax on medical service provider, if it fails to
ensure special accessibility facilities for persons with disability to the place
of service (applicable from 1 July 2019) – this will help ensure services to
persons with disability
V. FISCAL MEASURES
Corporate Tax
 The tax rate for banks, insurance and financial institutions has been
reduced by 2.5% which leads to the following:
 Publicly traded institutions and the ones approved by government in 2013:
40% to 37.5%
 Non-publicly traded institutions: from 42.5% to 40%
 Reduction may lead to loss of revenues worth about Tk. 1000 crore
 Wrong signal: No distinction made based on performance
 Hardly likely to increase liquidity
 Tax on RMG export earnings have been increased – more revenue generation
 12.5% (from 12%) if the company is publicly traded, and 15% (from 12%)
otherwise
 12% for companies with Green Building Certification (from 10%)– to encourage
environment-friendly production, the rate could have remained the same

V. FISCAL MEASURES
Special Tax incentives (waivers/exemptions)

 Tax exemption on taxed dividend to be received by a company resident in
Bangladesh
 Tax exemption for
 income from operation of day care home (for elderly and children)
 income from the operation of an educational or training institution run
exclusively for persons with disability
- good initiatives in terms of promoting social responsibility
 Remittance earning from proceeds of sales of software and services to a
foreigner (individual or company) - this will promote development of
export-oriented ICT sector which has significant potentials
 Return of income tax waived for non-resident Bangladeshis (NRBs) having
no permanent establishment or fixed base in Bangladesh – Will reduce
hassle for NRBs

V. FISCAL MEASURES
New measures to expand tax base

 TDS (tax deducted at source) on the payment received by the owners of
motor vehicles used in ride sharing services at the rate of 3%
 5% VAT on provider (e.g. Uber, Pathao) of popular app based services –
the burden will be passed on the consumer
 Dealers of companies/distributors brought under tax net: 1% TDS to be
deducted by dealing banks or financial institutions – will enhance revenue
New provisions to expedite and monitor tax collection
 Collection of information regarding filing of return: All employers to
inform the NBR about submissions of returns by employees
 Automation of sharing data of other departments and agencies with tax
department and also via e-mails
 Serving notice via e-mail
 These provisions will reduce tax evasion and bring more people under tax net

V. FISCAL MEASURES
Undisclosed money
 Existing provisions about undisclosed money remain same : opportunities to
invest in real estate under Special tax treatment (19BBBBB), opportunities to invest
in government treasury bond by paying only 10% tax (19C), and voluntary
disclosure of income through payment of 10% penalty in addition to regular tax
(19E)
 CPD’s position:
 The existing provisions should be discarded to disincentivise tax avoidance/tax evasion
 A legal framework to deal with benami property is necessary
Tax Administration
 On-line return submission coverage expanded - will reduce hassle and increase efficiency
 Mandatory installation of Electronic Fiscal Device (EFD) instead of Electronic Cash Register
(ECR) and Point of Sale (POS) in all hotels, restaurants, resorts and shops across the country
from FY20 – will help ensure transparency in VAT collection system
 New Customs Act 2014 not likely to be passed in this year – Government fails to give priority
to needed reforms to modernize the tax system
 Formation of Investment Promotion Team and National Single Window (NSW) working
group – needs to expedite

V. FISCAL MEASURES
VAT-related Developments
 Changes in the Value Added Tax Rule 1991 to facilitate online return submission
 VAT Online system to be introduced
 15% standard rate of VAT to continue according to VAT Act 1991
 Turnover tax rate remained unchanged at 4% for traders with turnover threshold
between Tk. 36 lakh and Tk. 1.5 crore
 Truncated VAT rates are reduced from 9 to 5 rates for FY19
 these are 2, 4.5, 5, 7 and 10%
 Attempts to take preparatory steps in view of operationalisating VAT and SD
Act 2012 from July 2019
Changes in duty structure at local level
Protection for the small industries and marginal groups
 Food items such as cheap loaf, handmade biscuits, etc. which are priced below Tk.
100/kg has been VAT exempted. Similar measure has been proposed with regard to
sandals and slippers made of rubber and plastic – marginal groups friendly steps
 For protection and development of local livestock industries, import of millet seed as a
Fodder Crop Seed has been exempted from VAT on import – will reduce animal food
price
V. FISCAL MEASURES
Development of local industries

 VAT and surcharge exemption have been proposed on local manufacture of
mobile phone. At the same time, imports of mobile handsets are to be
discouraged with imposition of 2% surcharge on the import - expected to
incentivise the industry and attract investment
 Exemptions and concessionary rate of import duties for some pharmaceutical
raw materials including cancer medicines and Active Pharmaceutical Ingredients
(APIs) – will reduce production cost
 VAT exemption on motorcycle parts – will benefit local import-substituting
manufacturers

V. FISCAL MEASURES
 To bring consistency, slabs for different truncated VAT rates have been reduced to
5 rates:
Flat sale/resale sees discriminant taxation
 2% flat VAT proposed to impose on the sale of flats of size 1-1,600 sft. Previous
rates were 1.5% for flats of size 1-1,100 sft and 2.5% for flats of size 1101-1,600 sft –
middle-class buyers to benefit, however, rate for lower income groups increased
 The resale of all sizes of flats will be facing 2% new VAT – will increase the cost for
limited income buyers
Additional fiscal burden for Furniture industries
 VAT on selling and manufacturing of furniture raised by 1 percentage point – will
raise price
Increased duty rates for local clothing brands
 Truncated VAT on branded garment outlets increased from 4% to 5%. Same VAT
shall also be applicable on sale of non-branded garment items in the local market –
no distinction between branded and non-branded local outlets which will
discourage the promising local brands
V. FISCAL MEASURES
VAT on Information technology enabled services (ITES) raised

 5% VAT (instead of 4.5%) on information technology enabled services that include
digital content development, animation, geographical information services (GIS),
website services, data entry – will it discourage employment?
 5% VAT shall be imposed on a newly generated service code named “Virtual
Business” to bring these online and bring app based virtual businesses within the
tax net
 E-commerce will remain outside the net (zero rated) as per the SRO in 2016
 Ride sharing services will be subject to 5% VAT imposed on the popular app
based service providers – the additional cost may be passed on to the
consumers
Tobacco tax sees new height
 SD (at local stage) raised on low and medium segment cigarettes to 55% and 65%
respectively. Price of homemade bidi (with filter) has also been increased
 25% CD were imposed on tobacco export in FY18. However, CD has been
withdrawn on tobacco exports in FY19 – will it contradict the consumption related
measure?

V. FISCAL MEASURES
Duties at import stages

 Duty to be changed only on a few products (270)
 Advanced Trade VAT rate has been increased across the board (both at import and
trade stages) from 4% to 5% - will generate additional revenue at import stage
 Existing (six) slabs of Customs Duty (0%, 1%, 5%, 10%, 15%, and 25%) will remain
unchanged
 Supplementary duties and regulatory duties have been newly imposed on a number
products - to generate more revenue
 Attempt to provide protection to selected domestic industries, incentivise export,
and to rationalise tariff structure by reducing prevailing discrepancies
Duty changes
Types of duty Increased Decreased Newly imposed Waived Total number of changed items
Custom Duty 10 15 0 1 26
Supplementary Duty 8 26 80 1 115
VAT on Import 0 0 20 37 57
Advanced Income Tax 0 0 2 3 5
Regulatory Duty 6 4 40 7 57
Excise Duty 0 0 3 7 10
24 45 145 56 270
Total (8.9) (16.7) (53.7) (20.7) (100)
V. FISCAL MEASURES
Change in duties on selected items

 Duty imposed on semi-milled and wholly milled rice: CD (25%), RD (3%), VAT (15%),
AIT (5%); TTI = 60.3%; Also VAT imposed at import stage on all types of rice – CPD
had proposed this earlier. Welcome initiative to safeguard interests of farmers. However
somewhat late
 VAT on a number of pharmaceuticals ingredients reduced to zero from 15%. Tax
incidence reduced by about 14% - will reduce cost of production of pharmaceutical
items
 RD on a number of items e.g. Aluminium Alloy increased (from 3% to 20%) –
apparently for revenue purposes
 SD on a number of items decreased; e.g. ambulance fitted with equipment (SD of 45%
reduced to zero): A good initiative that has reduced TTI by 56%
 Twenty items on which VAT has been newly imposed at import stage include (semi)
Chemical Wood Pulp , Cotton Linters Pulp etc.
Imposition of Regulatory Duty on selected items
 20% on Wire of aluminum (> 7mm), 20% on Wire of aluminum (<= 7mm),
 10% RD on Wheat Starch, Potato Starch, Manioc Starch, Other Starches. 3% imposition
of 33 products includes Brazil Nuts, coconuts, Hazelnuts etc. :Revenue purpose
V. FISCAL MEASURES
Duty on luxury goods continues to rise – Welcome initiative!

 In FY18, duties were increased on luxury goods. SDs on bathtubs, jacuzzi
and shower trays, toiletries, perfumes (except attar), body sprays, cosmetic
and beauty products and similar items (except aromatic vapour) have been
increased in FY19 as well – will generate additional revenue and
discourage import
Health and Environmental issues – Welcome initiative!

 SD to be imposed on production of all kinds of polythene and plastic bags
at the rate of 5%: welcome move
 Energy Drink: SD increased from 25% to 35%: measure taken to reduce
health risks

V. FISCAL MEASURES
 According to the budget documents, CD, SD and VAT at import stage was
planned to grow at more than 30%, 50%, and 20% respectively in FY19
 CPD has analysed the duty structure for FY19 based on import data for July-
March FY18 to assess validity of targets in public finance framework at import
stage. We have considered MTMPS assumption of import grow of 12% for
FY19
 CPD analysis found that, changes in the proposed duty structure did not
conform with fiscal framework targets for growth of import duties. The
estimated growth based on the changes in the duty structure diverges
significantly from the budgetary targets:  revenue at import level will fall
short of target
Growth (%) planned for BFY19 Growth (%) from changes in duty
Duties
over RBFY18 structure
VAT 31.2 11.2
Custom Duty 22.7 10.6
Supplementary Duty 51.4 11.9
Note: Annual average growth of NBR import was 14.5 for last five years
V. FISCAL MEASURES
Key Observations
 In terms of personal income tax the expected relief to lower income group
taxpayers did not materialise
 Corporate taxation changes were geared not to stimulate investment but to
succumb to pressure from the banking lobby
 Whilst there are attempts to broaden the tax net and provide protection to
domestic market oriented and import substituting industries, CPD
estimates show that some of the highly optimistic projections in revenue
mobilisation are highly unlikely to be attained
 Without commensurate institutional strengthening and the much-needed
reforms the significant gap between high ambitions and actual achievement
in revenue mobilisation will continue to persist

VI. SELECTED
SECTORAL ISSUES

Agriculture
 Allocation for Agriculture and Allied Sectors (AAS) increased by 7% in BFY19 compared to
that of RBFY18.
 Highest allocation of budget is in Ministry of Agriculture.
Trends in Agriculture and Allied Sectors (AAS)
7FYP Target Current Status 30,000
Attain Zero rates kept unchanged
significant for the import of key 25,000
growth of ingredients such as
agricultural fertilizer, insecticides.
20,000
sector To ensure sustainable
development, environment- Crore Taka
15,000
friendly and climate
adaptation programmes are
being emphasised. 10,000
Improve Budget allocation for

water Ministry of Water 5,000
resource Resources has increased by

management 13.7% in BFY19 compared -
RBFY18
BFY19
AFY9
AFY6
AFY7
AFY13
AFY14
AFY15
AFY8
AFY10
AFY11
AFY12
AFY16
AFY17
for to that of RBFY18.
supporting
agricultural Ministry of Agriculture Ministry of Fisheries and Animal Resources
growth Ministry of Environment and Forest Ministry of Land
Ministry of Water Resources

Agriculture
 However, share of AAS in total budget has continued to decrease over time (5.7 per cent in
BFY19) due to low cost of fertiliser.
 Moreover, growth of actual budget declined from 12.3% in AFY16 to –5.5% in AFY17.
Share in Budget and Growth of Actual Budget
70.0
60.0
50.0
40.0
Percentage
30.0
20.0
10.0
7.9 8.2 9.5 10.7 10.9 9.8 9.6 11.3 9.2 7.8 7.5 6.3 5.7 5.7
0.0
-10.0
-20.0
AFY6 AFY7 AFY8 AFY9 AFY10 AFY11 AFY12 AFY13 AFY14 AFY15 AFY16 AFY17 RBFY18 BFY19
% of Total Budget Expenditure Growth
Note: (i) AFY: Actual Budget for Fiscal Year; (ii) Revised Budget for Fiscal Year

Education
Budgetary allocation for education has increased
 Allocation in BFY19 is Tk 53,504 crore while it was Tk 46757 crore in RBFY18
 Largest incremental share for education was in Secondary and Higher Education
Division.
 Although allocation is on the high side, share of allocation in budget and GDP is
worrying Share of education expenditure in
budget and GDP
18.0 2.50
Allocation for education fell as share of 16.0
2.18 2.19
2.09 2.09
1.95 2.01
total budget 14.0 1.78 1.73
1.87 1.85 2.00
 In BFY19, education received 11.4% of total 12.0
budget while it was 12.6% in RBFY18 1.50
Budget
10.0
GDP
8.0
1.00
6.0
Allocation as Share of GDP remains 4.0 0.50
stagnant
12.6
14.1
14.1
11.6
11.0
11.6
11.7
14.3
16.1
11.4
2.0
 Share of GDP in BFY19 and RBFY18 is 0.0 0.00
2.09%
Share of Total Budget (%) Share of GDP (%)
Education
Both figures remain below the standards set by 7FYP and Education
2030 Framework for Action of UNESCO
 7FYP requires spending of 2.84% of GDP in BFY19 Expenditure per student enrolled in primary
and pre-primary education (in Taka)
 The Education 2030 Framework for Action set
 4 -6% of GDP
 15 -20% of public expenditure.
Expenditure per student enrolled in primary

and pre-primary education has increased
Taka
 Public expenditure per student enrolled in primary
and pre-primary school education has increased by
Tk 1,626 during FY2010-17
2,575
2,698
3,003
2,905
4,201
AFY10 AFY14 AFY15 AFY16 AFY17

Health
Budgetary allocation for health has increased in nominal terms
 Tk 23,383 crore has been allocated for BFY19, which was Tk 20,014 crore in RBFY18
 Largest incremental share for health was in Health and Service Division
Allocation for health as share of total budget has fallen

 Health received 5.03% of total budget which was 5.39% in RBF18
 In FY17, two-thirds of the allocated Tk 20,652 crore was unspent (source: Statement II:
Operating and Development Expenditure; pg 22)
Share of health expenditure in budget and GDP
0.89 0.92
6.00
5.00
4.00
0.72 0.79 0.80
0.73 0.71 0.70 0.69 0.73
? 1.00
0.80
Budget
0.34 0.60
GDP
3.00
0.40
2.00
5.60
5.03
4.34
2.46
4.52
5.42
5.39
4.35
4.76
4.76
5.67
1.00 0.20
0.00 0.00
AFY09 AFY10 AFY11 AFY12 AFY13 AFY14 AFY15 AFY16 AFY17 RBFY18 BFY19
Share of Total Budget (%) Share of GDP (%)


Health
Share of GDP has increased but stays below 7FYP and World Health Organization
(WHO) targets
 Health sector received 0.92% of GDP which was 0.89% in RBFY18
 7FYP targeted spending 1.04% of GDP in BFY19
 WHO considers a benchmark of 5% of GDP or GNI of the country for health expenditure.
Per capita real expenditure on health

Insignificant rise in per capita public
458
expenditure
354
 Per capita real public expenditure on
318
309
health has increased by TK 149 during
Taka
FY2014-18
176
 This is worrying as over two-thirds of
total health expenditure is financed by
out-of-pocket spending.
AFY14 AFY15 AFY16 AFY17 RBFY18

Social Protection
 In the proposed budget for FY2018-19, three praiseworthy changes were made in line with
CPD’s budget recommendations in April 2018
 The budget for social protection excluding pension was made 1.6% of GDP
 A digital database of all social protection beneficiaries is being created
 However, such a database must be publicly available in order to ensure transparency
 Direct transfer of social protection benefits from government to people (G2P) through electronic fund
transfer (EFT) has been started
 Nevertheless, the total allocation for pension account for 35% of total social protection budget
and the per capita allocations for pension continue to dwarf the per capita allocations for all
other social protection programs
Social protection budget as % of GDP Per capita allocations of pension and all other social
protection programs
3 40000 35936
Allocation per capita in Taka

35000
2.5
30000
2
Percentage
25000 21112
19049
1.5 20000 15512 16877 16002
13901 14171
15000 11128 11571 12317
1
10000
0.5 2642 1578 1612
5000 1787 2023 2269 386 533 531 549
298
0 0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
Social protection budget excluding pension as % of GDP Per capita pension budget
Social protection budget as % of GDP Per capita social protection budget excluding pension

Social Protection Change in coverage and allocation of largest social

protection programmes between FY2017-18 and
FY2018-19
 The coverage and allocation for 8 out of the 10
largest social protection programmes has Secondary Education Sector -21
Investment Program -21
increased from the previous year
 However, per capita allocation for maternal, Maternal, Neonatal, Child and 41
Adolescent Health 74
neonatal, child, and adolescent health
programme has decreased by 19% Test Relief (TR) Cash (man 7
month) 7
 Per capita allocations for 3 out of the 10
largest programmes increased by only 3%, Vulnerable Group Development 5
while per capita allocation for 5 out of the 10 (VGD) (man month) 2
largest programmes remained unchanged Work For Money (WFM) (man -21
 Coverage of Vulnerable Group Development month) -21
(VGD) programme has been increased, with 28

Vulnerable Group Feeding (VGF)
special emphasis on Teknaf and Ukhiya 25
indicating that communities that host Rohingya Employment Generation

0
Programme for the Poor (man
refugees are the intended beneficiaries month)
0
 A broad framework for a universal pension 14

Old Age Allowance
scheme was outlined in the budget speech 14
 However, no budget allocations were made 3

Honorarium for Freedom Fighters
for the universal pension scheme, citing the 0
need for fundamental structural reforms and Pension for Retired Government 126
huge cost as obstacles Employees and their Families 1
-50 0 50 100 150

Percentage change
CPD (2018): An Analysis of the National Budget for FY2018-19 Change in allocation Change in coverage 64
Gender Budget (43 Ministries/Divisions)- Increased allocation, low transparency in

expenditure
 Allocation for Gender Budget in FY19 (Tk 1,36,938 crore) increased by 63.74% against RBFY18.
 Share of Gender Budget in Total budgetary allocation in FY19 (29.48%) is highest since Gender Budget
was introduced.
Trend of Gender Budget
Gender Revised Difference
Budget Gender 35.00 6.00
(Tk in Budget (% of original 5.43
30.00 5.00
Year crore) (Tk in crore) budget) 4.53 4.45 4.38
Scale Budget Share

25.00 4.23 4.15
FY14 61567 59756 2.94 3.74
3.99
3.74
4.00
Scale GDP
20.00 3.42
FY15 66739 64087 3.97 3.00
15.00
FY16 79087 71871 9.12 2.00
10.00
FY17 92765 86586 6.66
5.00 1.00
FY18 112019 83633 25.34
0.00 0.00
RB FY13
RB FY12
RB FY10
RB FY11
RB FY14
RB FY16
RB FY15
RB FY17
RB FY18
FY19*
 Highest allocation in Power Division (10.5% of
Gender Budget) and Lowest in Ministry of Gender Budget as percentage of Total Budget
Commerce (0.03% of Gender Budget)
Gender Budget as percentage of GDP
 Ministry of Labour and Employment has
received reduced share of Gender Budget in the total budget allocation for the Ministry, from 63.6%
to 42%
 Lack of transparency in the actual spending of Gender budget: Realized Gender Budget is not
available.

Child Budget – steady allocation, low transparency in expenditure

 Two additional ministries are now associated with child budget. Total number of child-centric
ministries have gradually increased to 7, 13 and 15 in FY 2016-17, FY 2017-18 and FY 2018-19
respectively.
 The government has targeted to allocate 20% of total budget for children by 2020.
 Encouragingly, child budget as percentage of GDP has increased from 2.50% to 2.59%.
 Largest incremental share is in Public Security Division.
 Allocation has increased from 13.96% in FY18 to 14.13% in FY19.
 Highest allocation is under Ministry of Primary and Mass Education where child-centric
budget is 99.5 % of total ministry budget and lowest allocation is under Law and Justice
Division (0.7 % of ministry budget).
 Lack of transparency in actual expenditure due to non-reporting of data.
Budget Growth of
Some of the major achievements of child-centric
As % of ministries:
Allocated child As % of
Fiscal Year Total
(BDT centric
Budget
GDP  Of the of 39,841 government record of Rohingya
crore) budget (%) children, 9,000 are being provided with a monthly
stipend of TK 2000 by UNICEF.
FY16 (B) 38388 13.01 2.22
 Education Support Fund has been introduced with
FY17 (B) 49612 29.2 14.57 2.51 Tk 1000 crore allocated for ensuring right to
FY18 (B) 55860 12.6 13.96 2.50 education of disadvantaged children.
 91 action programmes were conducted through
FY19 (B) 65650 17.5 14.13 2.59
which 50,000 children were saved from hazardous
work during the last three years.
Senior Citizen – Highlights

 Beneficiary coverage of old age allowance has increased from 35 lakh in FY18 to 40 lakh in FY19.
However, per capita allocation remains unchanged from the previous year.
 Moreover, the per capita allocation is insufficient considering the high cost of living in Bangladesh.
Following the normal demographic trend, the proportion of elderly population would also increase
as in other developed countries, thereby making it difficult to support senior citizens through budget
transfers.
 The GoB has proposed the distribution of allowances of old age, widow, tortured women, and
disabled persons in 11 districts through G2P payment system to be finalised by the next fiscal year.
 Tax payable threshold for senior citizen aged 65 years and above remains unchanged at a level of Tk
3 lakh per annum.
Coverage (persons Budget (Taka in Change in Change in Per capita

in lac/Man Month) lakh) coverage allocation allocation
Revised FY18 35 21000 600
Budget FY19 40 24000 14.29 14.29 600

Climate Change
 Climate Relevant Allocation for FY 19
 Out of 20 Ministries’ Budget: 8.82% is Climate Relevant (GoB)
 As a share of GDP, climate allocation is increasing
 As a share of total budget, climate allocation is increasing
 Growth rate of climate relevant allocation is decreasing
Bangladesh Climate Change Strategy and Government Ministries’ allocations

Action Plan (BCCSAP): Areas of allocation ➢Ministry of Environment, Forest and Climate
➢Food Security, Social Protection and Health: Change:
highest allocation 46.01%; 7.81% lower as share of allocation as share of ministry budget highest at 52.68%,
total climate allocation from FY 2018 increasing 15.21% from FY 2018
➢Research and Knowledge Management: ➢Ministry of Fisheries and Livestock: allocation
lowest allocation 0.04% of ministry budget, declining by 5.11% from FY 2018
declining 9.98% from FY 2018 ➢Ministry of Women and Children Affairs: allocation
➢Climate Resilient Infrastructure: allocation as share of budget declining the most by 15.69% from FY
increasing 46.76% from FY 2018 2018
Climate allocation as share of GDP Climate allocation as share of total Growth in climate relevant
(%) budget (%) allocation (%)
0.75% 4.73%
0.76% 5.00% 25%
0.73% 4.04% 4.05% 4.08% 21%
0.74% 4.50% 3.87% 18%
Share of Budget (%)
4.00% 20% 16%

Share of GDP (%)
Growth (%)
0.72% 0.70% 13%
3.50% 15%
0.70% 3.00%
0.68% 0.67% 2.50% 10%
0.66%
0.66% 2.00% 5%
1.50%
0.64% 0%
1.00%
0.62% 0.50% 2015-16 2016-17 2017-18 2018-19
0.60% 0.00%
2014-15 2015-16 2016-17 2017-18 2018-19 2014-15 2015-16 2016-17 2017-18 2018-19
Local Government Division

Local Government Division (LGD) Budget Budget Allocation in FY19:
35,000
7.61%
8.00%
 Allocation for LGD in
7.08% 7.14% 7.00%
30,000
6.59%
6.87%
6.27%
FY19 increased
6.00%
25,000 5.71% (growth in FY19 over
% of total budget
5.00%
Crore BDT
20,000
4.00%
RBFY18 was 9.8%)
15,000
3.00%
 However, allocation as
10,000
2.00%
a share of total budget
5,000 1.00% decreased from
- 0.00% 7.14% in RBFY18 to
2012-13
(A)
2013-14
(A)
2014-15
(A)
2015-16
(A)
2016-17
(A)
Revised
2017-18
Proposed
2018-19 6.27% in FY19
LGD budget allocation LGD Budget as percentage of total budget
 Pattern for LGD allocation share of total budget follows an alternating trend -
decreased in ABFY14, ABFY16, ABFY17 and FY19 from respective prior FYs
 Allocation for Rural Development and Cooperatives Division in FY19 increased
by 0.59% from RBFY18 and 17.25% from FY18
 Overall, LGRD budget in FY19 increased by 8.97% from RBFY18, but its share
in the total budget decreased to 7.03% from 8.07% over the same period
Defence
 The budget allocation for defence for FY19 is Tk 29,048 crore, which is 12.9% higher than
the allocation for the previous year.
 Overall, share of defence in the budget has decreased (from 6.48 % in FY18 to 6.26 % in
FY19).
Table: Defence expenditure and allocation in recent years
Actual 2015-16 Actual 2016-17 Revised 2017-18 Budget 2018-19

Ministry of Defence - Defence Services
Non-Development 17656 21248 23611 26750
Development 416 406 680 1152
Total 18072 21654 24291 27902
Ministry of Defence - Other Services
Non-Development 290 447 1435 1147
Total 290 447 1435 1147
Armed Forces Division
Non-Development 21 29 30 35
Total 21 29 30 35
Total Defence Services 18383 22130 25756 29084
Growth 20.4 16.4 12.9
% of Total Budget Allocation 6.23 6.51 6.43 6.26
70
CPD (2018): An Analysis of the National Budget for FY2018-19
Defence
 Actual spending in defence has been surpassing the original defence budget over
the past few years.
 In India, the allocated amount for defence accounts for 12.10 per cent of the total
central government expenditure for the year 2018-2019.
Table: Change in budget allocation for defence
Change from
Change in actual original to actual
Year Original Revised Actual (% of Revised) (% of Original)
FY14 14,458 15,180 13,920 -8.30 -3.72
FY15 16,462 17,770 17,490 -1.58 6.24
FY16 18,383 20,694 20,313 -1.84 10.50
FY17 22,130 23,212 23,621 1.76 6.74

VII. POLICY AND
INSTITUTIONAL
ISSUES

• An elected government is expected to deliver what it pledges to the

people,
• Similarly, what it announces in national policies and consequently
announces in national budgets.
• However, significant gaps exist between election pledges and their actual
implementation
Election Pledges: Not Fulfilled
Issue Manifesto 2008 Manifesto 2014
Employment Comprehensive employment policy
will be developed
Local Devolution of state power and
government planning and budgeting authority to
zila parishad
Tax An Ombudsman will be
administration appointed
Land Scientific land
management
management policy 73
• According to 15.4 of the Public Money and Budget Management Act-2009, the
Finance Minister is supposed to report about the status of implementation of budget
to the National Parliament at the end of each quarter.
• Till May, 2018 a total of 28 reports were to be prepared; of those only 16 reports
have been prepared
• Instead of quarterly reports, those were half yearly reports
Budget Implementation Status
List FY Quarter Date
July-March 2009-10 2010 July-March May-10
July-December 2009-10 July-December Mar-10
July-September 2010-11 2011 July-September Dec-10
July-September 2011-12 2012 July-September Jan-12
July-September 2012-13 2013 July-September Nov-12
July- September 2014-15 2015 July-September Feb-15
July- December 2014-15 July-December Feb-15
July- September 2015-16 2016 July-September
July- December 2015-16 July-December
July- September 2016-17 2017 July-September
July- December 2016-17 July-December May-17
July-December
CPD (2018): An Analysis 2017-18
of the National 2018
Budget for FY2018-19 July-December May -18 74
• Despite the Election Year, the broader discussion on economic reforms is

largely absent in the budget speech.
• Various sections of the budget speech including ‘Reform and
governance’ did not highlight a forward-looking agenda
• During 2009-2018, government has framed/adopted 215 Acts and Rules
and 145 Policy Strategies (see next slide)
• Major changes in rules and procedures are observed in: local
government, environment, home affairs and science and technology
• Various other measures have been reported in different documents
• Documents include election manifestos, 7th FYP and national budget
speeches for various years
• CPD has reviewed the extent of implementation of different announced
measures by the government over the years.

List of Laws, Rules and Policies Framed and Adopted Between 2009-2018
Ministries Act/rules Policy Ministries Act/rules Policy
strategies strategies
Commerce 11 14 Cultural Affairs 2 4
Food 7 6 Bridges 1
NBR 3 0 Health and Family Plan. 4 0
Civil Aviation and Tourism 11 2 Industry 4 5
Road Transport and Highways 10 7 Information 5 6
Defense 2 0 Jute and Textiles 6 2
Fisheries and Livestock 6 5 Labour and Empl. 5 6
Cabinet 8 10 Law, Justice and 2 0
Parliamen
Comptroller and Auditor Genl 1 4 Land 5 5
Environment and Forests 17 0 Local Government 23 3
Home Affairs 17 0 Planning 3 2
Technical and Madrasah 1 0 Posts and Telecom 6 5
Religious Affairs 1 0 Social Welfare 10 15
Shipping 7 0 Water Resources 2 1
Women and Children Affairs 4 11 Liberation War 2 8
Youth and Sports 8 5 Science and Technology 12 9
Expatriates’ Welfare & Overs. 2 3 Supreme Court 4 0
Disaster Management 3 7 Total 215 145
CPD (2018):
Source: CPDAn Analysis of the National Budget for FY2018-19
Compilation 76
• We highlight reform related issues reported in the budget speeches of various years:
Financial sector, Local government, Public expenditure management and Tax related
Issues and Energy Sector
• Out of 87 different initiatives undertaken between FY2015-FY2019, only 34.5% have
been implemented, 36.8% have been ongoing and another 28.7% are yet to be
implemented
Summary of Status of Implementation of Selected Reform Measures (FY15-FY19)
Areas Status of Implementation (no. of initiatives)
No. of Implemented Ongoing Not Implemented
measures/initiatives
Local Government 10 4 3 3
Public Expenditure 6 2 2 2
Management
Public 7 2 3 2
Administration
Tax 18 8 5 5
Tariff 8 3 3 2
Banking 13 7 2 4
Capital market 3 1 2 0
Insurance 7 0 4 3
Power and energy 15 3 8 4
Total 87 30 32 25
Source: CPD Compilation
• Various reform measures undertaken over the years did not generate
the expected results in sectors such as local government institutions,

financial sector and tax and tariff related areas
• Some of the key measures as proposed by CPD are yet to be
undertaken-
 Enforcement of VAT and Customs Act 2012
 Setting up Public Expenditure Review Commission
 Setting up Financial Sector Reform Commission
 Devolution of power to the LGI
 Lack of implementation of the Coal Policy

• Organisations are weak in ensuring internal and external coordination and

integration which further delay the process of implementation and
undermine the quality of expected results
• Various interest groups exert pressure on the government which further
delay adoption of laws/rules and adversely affect their enforcement
• There is a need to address the issues that inform the political economy of
reform

VIII. CONCLUDING
REMARKS

1. Addressing the emerging stresses on macro-economic stability
A number of laudable fiscal measures have been taken to

strengthen domestic-oriented industries and enhance revenue
earnings. Support to the social safety net programmes is also
appreciated. However, budget for FY19 is, overall, one of
maintaining the status quo. The budget statement builds more on
a review of the past, rather than a focus on future. It lacks
sensitivity towards existing and emerging macro stresses e.g.
pressure on balance of payment and exchange rate, inflationary
expectations etc. as well as scant attention to areas requiring
reforms.
Moreover,
 No well-crafted action plan to implement the budget: strengthen revenue
collection, deliver public expenditure, raise allocative efficiency, improve
expenditure efficacy, and ability to pursue the deficit financing programme
1. Addressing the emerging stresses on macro-economic stability

(contd.)
 No concrete initiatives towards strengthening of implementing

institutions and oversight mechanisms
 Inconsistent budget programming e.g. import growth target totally out of
line with foreign finance driven import demand
 No substantive work programme to reenergize the stagnant private
investment
 Cost overrun and time overrun of ADP projects creating fiscal pressure
and impeding private investment
 Absence of adequate response measures to the challenges in the banking
sector; Rather a number of measures that indicate to the contrary
 Ironically, the issue of underwriting the cost of hosting Rohingyas is
missing

2. Addressing inclusivity of growth and other achievements

Compared to the macro-stresses, inclusivity has been better addressed in the
budget, albeit mostly through short term measures. The medium to long
term challenges e.g. inequality, both income and wealth, unplanned
urbanisation and other issues mentioned in the fourth quadrant in the
aforesaid budget backdrop, remain ignored.
Moreover,
 The anticipated (food and non-food) price pressure will fall disproportionately
on low income people and worsen consumption and income inequality situation
 Increased food inflation may adversely affect low-income households
 Lower and middle income groups to bear the pressure of the higher (indirect) tax
incidence
 Stagnating shares of education and health are anti-equity – the high investment
in infrastructure coupled with resource constraints may be resulting in allocative
trade off

Although,
 Enhanced safety net coverage likely to improve income and
transfer
 Enhanced surcharges on assets are steps in the right direction
 Announcement of universal pension scheme to improve
inclusivity albeit only when implemented
Hope all the concerns raised in our review

will find space in the upcoming debate

Thank You
Please visit: http://cpd.org.bd/

CPD Presentation On Analysis of The National Budget For FY2018 19

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বাাংলাদেদের উন্নয়দের স্বাধীে পর্যাদলাচো

Dhaka: 8 June 2018

CPD (2018): An Analysis of the National Budget for FY2018-19 2

CPD (2018): An Analysis of the National Budget for FY2018-19 3

CPD (2018): An Analysis of the National Budget for FY2018-19 4

CPD (2018): An Analysis of the National Budget for FY2018-19 5

 The budget for FY19 is being brought out in the context of –

CPD (2018): An Analysis of the National Budget for FY2018-19 6

 The budget is being brought out in the backdrop of

CPD (2018): An Analysis of the National Budget for FY2018-19 8

CPD (2018): An Analysis of the National Budget for FY2018-19 9

GDP, investment and inflation

Poverty and inequality

CPD (2018): An Analysis of the National Budget for FY2018-19 11

 If monthly household income distribution is investigated at the decile level,

CPD (2018): An Analysis of the National Budget for FY2018-19 12

Erosion of real income of labour

CPD (2018): An Analysis of the National Budget for FY2018-19 13

CPD (2018): An Analysis of the National Budget for FY2018-19 15

Monetary and external sector

CPD (2018): An Analysis of the National Budget for FY2018-19 16

Monetary and external sector

CPD (2018): An Analysis of the National Budget for FY2018-19 17

CPD (2018): An Analysis of the National Budget for FY2018-19 18

Local Government 12.18% 70.8% Allocation for 84 ongoing and 44 new

CPD (2018): An Analysis of the National Budget for FY2018-19 19

Medium Term Outlook

Broad fiscal framework

CPD (2018): An Analysis of the National Budget for FY2018-19 21

Revenue mobilisation Share of revenue FY19

CPD (2018): An Analysis of the National Budget for FY2018-19 22

CPD (2018): An Analysis of the National Budget for FY2018-19 23

Total Public Expenditure

Subsidy and incentives Subsidy: Share of GDP and total budget

 Agriculture received 28.4% of the 4.0

Budget Deficit and Financing

 Share of domestic financing 56.8% in FY19 (58.9% in RBFY18)

CPD (2018): An Analysis of the National Budget for FY2018-19 27

CPD (2018): An Analysis of the National Budget for FY2018-19 28

Annual Development Programme

 Project Aid to finance 34.7% of total ADP in FY19

5.3% from original ADP of FY18

Top Five Sectors in ADP FY19

FY18 Number of Total Projects: FY19 Number of Total Projects:

 However, a total of 538 projects are scheduled to be concluded in FY19, according to

Status of ‘to be completed’ projects Maximum possible completion of

Progress of Fast Track Projects

CPD (2018): An Analysis of the National Budget for FY2018-19 34

 Practice of providing symbolic allocation (the minimum to keep the project

CPD (2018): An Analysis of the National Budget for FY2018-19 35

 Ageing projects (Zombies!)

 326 projects has been listed with an expectation to be financed

Cost and time overrun reduces the efficacy of public investment

 Self-financed development budget is reported for the fifth time (since

 The business as usual regarding ADP continues -

CPD (2018): An Analysis of the National Budget for FY2018-19 39

CPD (2018): An Analysis of the National Budget for FY2018-19 40

Personal Income Tax (PIT)

CPD (2018): An Analysis of the National Budget for FY2018-19 41

CPD (2018): An Analysis of the National Budget for FY2018-19 43

Special Tax incentives (waivers/exemptions)

CPD (2018): An Analysis of the National Budget for FY2018-19 44

New measures to expand tax base